Former French PM Calls For Concessions On Tax Shield

by Ulrika Lomas, Tax-News.com, Brussels

29 April 2009

Mayor of Bordeaux and former French Prime Minister Alain Juppé has recently stated that amendments now need to be made to the existing French tax shield or “bouclier fiscal”, particularly in view of the deepening economic crisis. Juppé has also indicated that taxes in France may well have to rise in order to repay the country’s mounting debt, once the economic downturn is finally over.

Despite maintaining his allegiance to the government, Juppé has nevertheless emphasised that concessions must now be made regarding France’s highly controversial tax shield, as a sign to the nation of justice and equality. Alluding to a recent announcement by the current French Prime Minister François Fillon that a “confiscatory” tax will be introduced and levied on “retraites chapeaux” or enhanced final salary pensions accorded to some company managers, Juppé has confirmed that this measure is a step in the right direction.

According to the former Prime Minister, the tax shield was previously justifiable when it was created in July 2007. The tax shield currently limits direct taxes in France (income tax, wealth tax, and local taxes such as dwelling and real estate tax) to 50% of income, including social contributions, honouring a pre-election pledge made by French President Nicolas Sarkozy, that no-one will pay the tax authorities any more than half of what they earn. However, given the prevailing financial crisis, the shield has, Juppé asserts, now become increasingly difficult to defend.

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